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Taxes

Opinion: Europe needs to tax multinationals properly

Big companies with brilliant lawyers and expensive tax consultants find it easy to get around paying their tax bills in Europe. But maybe not for much longer, says DW business editor Andreas Becker.

The road to hell is paved with good intentions. A great example is the way corporations with subsidiaries in other European Union countries are taxed.

An EU directive from 2003 was actually designed to prevent companies in this situation from being taxed twice. But the reality is that firms have found a way to be not-taxed, twice. They use a loophole to pay no tax at all. Today, 11 years after the directive, EU finance ministers found a way to close the loophole.

Though it is late in coming, it is the right thing to do. But it is only the first step. National governments have pulled out the stops in chasing down tax revenue following the financial crisis of 2008. The EU says it is investigating cushy tax arrangements made by Apple, Starbucks and Fiat in Ireland, Luxembourg, and the Netherlands.

The 34 member nations of the Organization for Economic Cooperation and Development (OECD) are also dealing with the issue. A recent OECD report entitled Action Plan on Base Erosion and Profit Shifting lists15 areas where it says tax issues have to be regulated on a supernational level. They include digital services and products, multinational corporate structures, and the exchange of information.

So there is a lot of work to do for EU finance ministers. But they can only create common tax regimes by a unanimous vote. The long running dispute about tax havens and low corporate taxes in some countries has shown it will be an uphill climb.

But in the end, there is no way around the inevitability of bringing tax regimes around the EU more in line with one another. In a globalized world, it's easy for big companies to exploit the differences between the countries in which they operate. The unions have so far been powerless to find a multinational response to this trend. Europe's finance ministers should learn from this.